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      "author": "judezambarakji",
      "body": "@tcpolymath I know I'm late to the party, but could you make a follow up article explaining the math behind this idea of having Steem investors getting 100% of their stake rewards. \n\nI'm asking about the math because, correct me if I'm wrong, I think Steem currently has a monetary inflation rate that is decreasing at a fixed yearly rate. Would your proposal require Steem to be minted at an ever increasing or exponentially increasing rate of inflation? \n\nIn this new hypothetical proof-of-stake system for Steem if we set the inflation rate at let's say  2% would upvotes raise the inflation rate above the baseline/default inflation rate? \n\nI'm not saying that I want Steem to have a deflationary policy; I just want to point out that the success of Steemit Inc is primarily measured by and for better or worse primarily determined by the price of Steem. I think having an inflationary monetary policy with a speculative cryptocurrency i.e. a crypto coin whose value constantly fluctuates is a bad idea, because some content producers are trying to live off the value of Steem and I think most people don't want the value of their income to constantly fluctuate. \n\nWould it be possible, in your opinion, for all investors and users to invest in Steem and only receive their stake rewards in SBD and would it also be possible to have an SBD that is actually relatively price stable like Tether's TUSD or MakerDAO's Dai?\n\nCorrect me if I'm wrong, but  Steem currently has a diminishing rate of monetary inflation and would your proposed system require Steem to adopt an accelerating rate of monetary inflation, to put differently? \n\nWould the fear of raising the inflation rate be the primary reason as to why Steemit Inc chose to divide the stake reward among Steem's various types of users/participants rather than have each and every user receive a stake reward that is exactly proportionally to the amount of Steem they invest in?\n\nI would also like to ask if the circular effect you talk about when describing how proof-of-stake coins work to increase their own value over time is in fact a positive feedback loop. The critical mass effect that you say is required to make a proof-of-stake coin become popular and self-sustaining in the long-run sounds like the reason why ICOs exist in the first place if I'm not mistaken. I think ICOs are better at creating the required critical mass for the widespread adoption of a proof-of-stake coin than mining or airdrops, the latter of which has recently become very fashionable. Could you also more clearly articulate what you mean by \"critical mass\" in a follow up article?\n\nI would also love to hear your opinion on the U Network (the UUU token) and if it can effectively solve the upvoting problems that currently plague Steemit.",
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      "body": "I'm not really pushing this anymore, though I'm ok that some other people have taken it up, so I'm really not going to do followup posts, but I can answer that briefly.\n\n>Would your proposal require Steem to be minted at an ever increasing or exponentially increasing rate of inflation?\n\nI don't see why this would be necessary. There's not any new Steem being created, just a portion of the rewards pool is getting carved off to give to people who would rather have it directly. So when the inflation rate is 8%, you would be able to elect to get 8% directly, or have your 8% tossed into the voting rewards pool to be distributed by that mechanism. The rewards pool would be driven entirely by people who had elected to do that. So the inflation rate could keep decreasing, that would be fine.\n\n>Would the fear of raising the inflation rate be the primary reason as to why Steemit Inc chose to divide the stake reward among Steem's various types of users/participants rather than have each and every user receive a stake reward that is exactly proportionally to the amount of Steem they invest in?\n\nMy understanding from what Ned has said is that the primary reason for the upvoting system is to get Steem into the hands of as many people as possible by making it possible to earn it in what's essentially a free-to-play system. I may be reading into that too much, though. (In any case, while it has worked to get a lot of people a little Steem, it kind of flopped at putting an effective amount of Steem in the hands of a broad populace.) ",
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      "author": "judezambarakji",
      "body": "@tcpolymath I know I'm late to the party, but could you make a follow up article explaining the math behind this idea of having Steem investors getting 100% of their stake rewards. \n\nI'm asking about the math because Steem currently has a monetary inflation rate that is decreasing at a fixed yearly rate. Would your proposal require Steem to be minted at an ever increasing or exponentially increasing rate of inflation? \n\nIn this new hypothetical proof-of-stake system for Steem if we set the inflation rate at let's say  2% would upvotes raise the inflation rate above the baseline/default inflation rate? \n\nCorrect me if I'm wrong, but  Steem currently has a diminishing rate of monetary inflation and would your proposed system require Steem to adopt an accelerating rate of monetary inflation, to put differently? \n\nWould the fear of raising the inflation rate be the primary reason as to why Steemit Inc chose to divide the stake reward among Steem's various types of users/participants rather than have each and every user receive a stake reward that is exactly proportionally to the amount of Steem they invest in?",
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      "author": "steemitboard",
      "body": "Congratulations @judezambarakji! You received a personal award!\n\n<table><tr><td>https://steemitimages.com/70x70/http://steemitboard.com/@judezambarakji/birthday1.png</td><td>Happy Birthday! - You are on the Steem blockchain for 1 year!</td></tr></table>\n\n<sub>_You can view [your badges on your Steem Board](https://steemitboard.com/@judezambarakji) and compare to others on the [Steem Ranking](http://steemitboard.com/ranking/index.php?name=judezambarakji)_</sub>\n\n\n**Do not miss the last post from @steemitboard:**\n<table><tr><td><a href=\"https://steemit.com/steem/@steemitboard/3-years-on-steem-happy-birthday-the-distribution-of-commemorative-badges-has-begun\"><img src=\"https://steemitimages.com/64x128/http://u.cubeupload.com/arcange/BG6u6k.png\"></a></td><td><a href=\"https://steemit.com/steem/@steemitboard/3-years-on-steem-happy-birthday-the-distribution-of-commemorative-badges-has-begun\">3 years on Steem - The distribution of commemorative badges has begun!</a></td></tr></table>\n\n###### [Vote for @Steemitboard as a witness](https://v2.steemconnect.com/sign/account-witness-vote?witness=steemitboard&approve=1) to get one more award and increased upvotes!",
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      "body": "![](https://cdn.steemitimages.com/DQmYtugY3e6E2V1YKStjGegeZmCwCwYGYb2u9Zac3Cu8YEr/image.png)\n\nIn July of 2014, the crypto-world was introduced to the idea of a blockchain democracy, when Dan Larimer invented a new consensus algorithm for a decentralized exchange called Bitshares. This algorithm was called delegated proof-of-stake (DPOS) and it had the unusual property of encouraging its users to elect its network’s block producers or masternodes.\n\nFor the first time in blockchain history, the vast majority of a network’s users actually had a say in how its protocol would evolve and adapt to their ever changing needs. Unlike classic blockchain protocols like Bitcoin, Bitshares was not wholly dominated by an unruly and haphazard collection of masternodes called miners.\n\nBitcoin's protocol compels miners to act out of their own selfish self-interest, and it does not hold them accountable to the millions of crypto-investors who happen to use the same network. Mining empty blocks or batches of data with no transaction information, is just one example of the kind of selfish behavior that crypto-investors have come to expect from a proof-of-work governance structure.\n\nSome miners are willing to mine [empty blocks](Vhttps://news.bitcoin.com/reason-bitcoin-miners-empty-blocks/) for the [coinbase reward](https://en.bitcoin.it/wiki/Coinbase) and forgo the transaction fees of filled blocks, because they are afraid of losing all their potential block rewards to competing miners, who might solve the more profitable full blocks before them.\n\nThese kind of miners tend to ignore the growing number of unconfirmed transactions in the blockchain’s memory pool, so that they can mine the less competitive, but empty blocks. Which brings us to an important question: why should crypto-investors transact on a blockchain in which block producers have a financial incentive to ignore their transactions?\n\nBitcoin’s recent surge in popularity, has however; increased the overall [number of full blocks](https://bitcoinmagazine.com/articles/why-do-some-bitcoin-mining-pools-mine-empty-blocks-1468337739/) and made empty block mining an unprofitable affair. But why design a blockchain that encourages such behavior in the first place? And why should block producers have the freedom to prioritize short-term profits over long-term network growth?\n\n![](https://cdn.steemitimages.com/DQmQDyswwVjHRdTEZJYdpC7dvpth2MpZeQa6xqBtvnVDTGW/image.png)\n\n<center> Bitcoin has a [limited supply](https://en.wikipedia.org/wiki/Bitcoin#cite_note-93), which means that the coinbase — the collection of newly minted coins for every block, will keep decreasing until it ceases to exist, and when that happens there will be no incentive to mine empty blocks. </center>\n\nBitcoin apologists might argue that the block producers of DPOS blockchains have the ability to censor transactions, which is worse than having the ability to mine empty blocks. But Bitcoin miners have in fact censored transactions from [blacklisted addresses](https://bitcoinwhoswho.com/blog/2017/11/14/new-blacklisted-bitcoin-address-api/). If DPOS stakeholders dislike the censorship policies of their elected block validators, they can simply vote in another set of block validators. But in proof-of-work protocols, miners can censor the transactions of whichever wallet addresses they deem untrustworthy and they won’t face any repercussions.\n\nAddress blacklisting is in fact, a useful tool that DPOS blockchains can adopt to better govern their networks. Some crypto-maximalists might feel that address blacklisting makes a cryptocurrency less fungible and therefore less valuable as a form of currency, but blockchain democracies like EOS have proven that being able to freeze the accounts of criminals is more important to crypto-investors than having a fully fungible cryptocurrency.\n\nFurthermore, semi-fungible cryptocurrencies have higher market capitalizations and are,therefore; more popular than Monero and other privacy focused coins that harbor [criminal enterprises](https://www.bloomberg.com/news/articles/2018-01-02/criminal-underworld-is-dropping-bitcoin-for-another-currency). And they might become even more popular if future government regimes [publicly support blockchain](https://www.coindesk.com/goodbye-fungibility-ofacs-bitcoin-blacklist-remake-crypto/) democracies that have account blacklisting features.\n\nElections, account freezing, and other democratic actions that dogmatic proof-of-work supporters cry out against, prove that the financial incentives of block producers in DPOS blockchains are aligned with the needs of their respective communities.\n\nElections are in fact, the most essential aspect of blockchain democracies. In Bitshares, and [several other](https://steemit.com/~witnesses) blockchains that have developed various iterations of its consensus algorithm, one can only become a [masternode](https://cryptofresh.com/witnesses) if one has enough votes to become one of the top 30 or [top 21](https://voters.eostitan.com/voters/50/0/21) full node block producers: servers that store the full copy of the blockchain’s history and reap all the financial rewards of being a masternode. To become a partial node, or a stand-by block producer in one of these blockchain democracies, one has to receive enough votes to be in the [top 70](http://eos-bp-votes.dapptools.info/s/api/block-producer-votes-stack-html/1/70) or [top 100](https://steemit.com/~witnesses) elected block validators.\n\nElections determine who can and who cannot become a block producer in DPOS blockchains. And they ensure that the policies that candidate block producers choose to support, have a large impact on whether or not these potential masternodes are actually elected. Whereas consensus protocols that spawn amorphous leadership in blockchain communities like proof-of-work, rarely lead to the adoption of popular policies and often create social inertia.\n\nSome of Bitcoin’s hard forks, were in fact responses to its social inertia or inability to democratically evolve in line with the wishes of its community of investors. These hard forks spawned numerous [competing networks](https://en.wikipedia.org/wiki/List_of_bitcoin_forks) including: Bitcoin Cash, Bitcoin Gold, and Bitcoin Private. It’s hard to take Bitcoin seriously after so many [chain splitting hard forks](https://iconow.net/list-of-bitcoin-forks/).\n\nThe sheer number of these hard forks, also brings into question the idea that proof-of-work is the “most secure” consensus protocol ever invented. This obsession with protocol security, is however; a distraction from one of blockchain technology’s most useful attributes: decentralized leadership.\n\nA consensus protocol’s security mechanism should serve the needs of its leadership, rather than have its leadership serve the needs of a dogmatic faith in decentralized financial security.\n\n![](https://cdn.steemitimages.com/DQmddPhirVTsCgrZZtwChzp8ta6x2fMuBiWosEaMEJXEjEm/image.png)\n\n<center>In Bitcoin we trust. </center>\n\nMany miners and software developers tried to establish themselves as the [leaders of the Bitcoin community](https://medium.com/@bergealex4/on-extended-communication-failures-5ffb6fcc6b89), but their efforts failed and they instead created chain splitting hard forks to achieve their respective goals.\n\nBitcoin’s decentralized decision making structure, the [*Bitcoin Improvement Proposal* (BIP)](https://github.com/bitcoin/bips), failed to [unite its developers](https://medium.com/@bergealex4/the-tao-of-bitcoin-development-ff093c6155cd); even with the promise of funding from private companies like purse.io, and more chain splitting hard forks followed suit. Unlike Blockchain democracies, proof-of-work protocols cannot directly fund software development with [monetary inflation](https://en.wikipedia.org/wiki/Monetary_inflation), and this makes them less coordinated than their DPOS counterparts.\n\nEven after protocol changes such as [BIP 9 ](https://github.com/bitcoin/bips/blob/master/bip-0009.mediawiki)— a method for broadcasting imminent or ongoing soft forks to the entire network — which set the foundations for a potential Bitcoin governance structure , Bitcoin developers still haven’t managed to create a coherent leadership model.\n\nSome crypto-maximalists believe that any attempt to create a governance structure violates the trustless nature of blockchain technology. But this point of view could not be farther from the truth. Like the complex cryptography that underpins blockchain accounting, governance structures make it easier for the general public to trust protocol changes that receive grassroots support.\n\nFurthermore, many developers eventually realized that Bitcoin miners often place their own interests above the needs of the community. This was especially true for a feature called Segregated Witness: a protocol change that would remove Bitcoin’s block size limit and increase its transaction speed. Bitcoin’s community tried to use its User Activated Soft Work (UASF) feature — a social method for initiating protocol changes— to launch Segregated Witness as a soft fork, but their efforts ultimately failed.\n\n![](https://cdn.steemitimages.com/DQmehUcY2vGb6HzyEB7pXvmrFEdZ9o9yNy88CB3cTDJs6Be/image.png)\n\n<center> Blockchain miners make terrible leaders </center>\n\nMuch of the social inertia seen in Bitcoin’s protocol developments was the result of a misalignment of incentives and interests between miners and everyone else who happened to use its blockchain.\n\nSocial inertia may also explain why, after 4 years since Ethereum’s founder, Vitalik Buterin — first [suggested a protocol change](https://blog.ethereum.org/2014/07/05/stake/), Ethereum still hasn’t transitioned to a proof-of-stake consensus algorithm. To make matters worse, Ether’s phenomenal price rise at the beginning of the year, drew the attention of avid cryptocurrency miners — who then raised its [hashrate difficulty](https://etherscan.io/chart/difficulty). Ether mining is [no longer profitable](https://www.tomshardware.com/news/ethereum-profitability-down-difficulty-up,36691.html), but Ethereum’s miners still won’t fork the blockchain to a proof-of-stake protocol.\n\nSome Ethereum miners might be waiting for miners with smaller or cheaper mining rigs to drop out of the mining race as soon as the mining difficulty reaches a certain level. But the lack of protocol development may cause Ether’s price to drop, which would make this bullish strategy unprofitable and pointless.\n\nSome diehard Ethereum supporters might argue that its developers needed more time to further develop [Casper](https://cointelegraph.com/news/casper-what-is-known-about-the-new-ethereums-network-upgrade): the suggested protocol upgrade. There are [two different versions](https://www.trustnodes.com/2018/08/16/vitalik-buterin-tells-story-race-vlad-zamfir-implement-proof-stake-casper) of Casper being proposed: Vitalik Buterin’s Friendly Finality Gadget (FFG) — a hybrid PoW/PoS consensus mechanism, and Vlad Zamfir’s Correct-by-Construction — a full PoS consensus algorithm in which the validity of a new competing chain is determined by the number of nodes who agree on the correctness of said chain rather than how closely related its new blocks are to the genesis block (the first block or batch of transactions in the Ethereum blockchain).\n\nRegardless of which version of Casper they choose to implement, they will still have to convince miners that they can replace Ethereum’s proof-of-work with a perfect proof-of-stake algorithm. Ethereum’s development team have in fact, spent years trying to convince miners that Ethereum needs a new and more efficient consensus mechanism, even though the proof-of-stake protocol could have been implemented incrementally. If Ether investors could vote on Ethereum’s protocol, they would have probably agreed to a progressive switch to proof-of-stake.\n\nMiners’ irrational fear of a protocol change has forced Ethereum’s development team to tackle highly improbable problems that real world proof-of-stake blockchains have never faced. These theoretical problems include the dreaded [long-range attack](https://blog.ethereum.org/2016/12/07/history-casper-chapter-2/) and the infamous nothing at [stake dilemma](https://blog.ethereum.org/2014/07/05/stake/). The latter problem — which some developers believe is entirely fictional — is especially unlikely to occur, because block validators in any kind of consensus protocol, have to forgo more than one opportunity cost, when they decide to fork a given blockchain.\n\nIn a traditional proof-of-work protocol, miners are faced with two principal costs when they decide to fork the blockchain in question: the cost of creating new blocks on the new chain and the forgone block rewards that they would have received if they continued mining the old chain. If the new coin of their forked network is ignored by most investors — and the price of said coin is sufficiently low — they will have not only wasted their mining rigs’ power, but also forgone the opportunity to continue earning block rewards on the previous chain. Moreover, the block rewards of the new chain may be far lower than the rewards of the old chain.\n\nThe nothing at stake problem, which could be more accurately described as the multi-chain production problem, is about proof-of-stake block producers having the ability to simultaneously produce blocks for multiple chains without incurring any costs for every new block they validate. But they will, however; incur the cost of managing a more expensive server because each new chain will require more RAM to process transactions, and more hard disk space to download some of, if not the entirety of, the blockchain’s transaction history.\n\nThe idea that proof-of-stake block validators have “nothing at stake” when they produce blocks for multiple chains, ignores the fact that server costs increase as a blockchain network’s activity grows. Ethereum’s network activity, has for example, [grown to the point](https://hackernoon.com/the-ethereum-blockchain-size-has-exceeded-1tb-and-yes-its-an-issue-2b650b5f4f62) that many stand-by block producers cannot afford to manage the server costs of their partial nodes. Producing blocks for multiple chains increases one’s server costs, regardless of which consensus algorithm the network in question uses.\n\nPedantic commentators, might argue that the sunk cost of buying or creating a server and upgrading it when the blockchain grows in size, is far less than the accumulated cost of producing new blocks in a new chain. But it would be disingenuous to say that there is no cost, whatsoever, for producing multiple chains in proof-of-stake protocols.\n\nDPOS blockchains make multi-block production even more expensive by forcing block validators to spend time and energy convincing stakeholders to vote for them. Block producers who attempt to start a new chain or a competing network have to convince the stakeholders who had previously voted for them to run the old chain, to vote for each and every new chain they create. DPOS thereby solves the nothing at stake problem by introducing the social cost of garnering votes. There are real tangible costs to managing several social media accounts with thousands of followers, and building free to use applications, in the process of garnering stakeholder votes.\n\nTo solve the imaginary nothing at stake problem, Buterin and Zamfir developed the idea of the [slasher protocol](https://blog.ethereum.org/2014/01/15/slasher-a-punitive-proof-of-stake-algorithm/), which will force new block validators in a proof-of-stake version of Ethereum to have security deposits. If some of these block producers try to validate more than one chain of blocks at a time, they will lose their security deposit: the stake they had bought to become block validators.\n\nThe fanatical desire to maintain a proof-of-work algorithm has forced Ethereum’s development team to cook up novel proof-of-stake problems to please their blockchain’s miners. While some problems like [weak subjectivity](https://blog.ethereum.org/2014/11/25/proof-stake-learned-love-weak-subjectivity/) — the idea that many proof-of-stake block validators stay online intermittently to validate blocks — are legitimate decentralization problems, other factors such as speed and scalability might have a greater long-term impact on mainstream blockchain adoption.\n\nProof-of-work blockchains have, however; proven less secure than the proof-of-stake protocols that Ethereum’s development team have been trying to improve. Miners had, for example, double spent millions of dollars worth of [Bitcoin Cash](https://www.trustnodes.com/2018/05/24/bitcoin-gold-51-attacked-18-million-stolen-double-spends) when they realized that because it was a new coin; too few miners were mining it, and its resulting hashrate difficulty was low enough to be taken advantage of.\n\n![](https://cdn.steemitimages.com/DQmem7EtijrSCj2NnXLECs4XNXAMoEpLd8ty2cnswDkcB7Q/image.png)\n\n<center> A hacker needs only 51% of a proof-of-work coin’s hashing power to launch a double spend attack, but it would cost him more to launch the same kind of attack on a proof-of-stake coin because it would cost him 51% of that coin’s market capitalization. </center>\n\nDPOS blockchains have the same security features as proof-of-stake coins in addition to having a clear governance structure and being [orders of magnitude faster](https://www.trustnodes.com/2018/07/15/eos-hits-1200-transactions-per-second-ethereum-suddenly-faces-congestion). The [scalability trilemma](https://bitcoinist.com/breaking-down-the-scalability-trilemma/) makes DPOS blockchains, which have fewer nodes, faster but less decentralized than PoW and PoS protocols.\n\nUnfortunately for Ethereum’s most fervent advocates, its founder — Vitalik Buterin — seems to care more about security than speed and decentralization. Unbeknownst, to most Ether investors, any applied iteration of the PoS Casper protocol would produce an outcome in which most nodes would be unable to afford the security deposits required by the network and only the richest investors would continue to manage the nodes of the Ethereum blockchain. This is exactly what happen when Dash’s [price rise](https://coincodex.com/crypto/dash/) made becoming a [masternode](https://www.dash.org/masternodes/) extraordinarily [expensive](https://www.reddit.com/r/dashpay/comments/7dm9iu/cost_of_runningowning_a_masternode_420k_right_now/).\n\nSecurity deposits would also worsen the centralizing effects of Ethereum’s network growth. This subtle, but inevitable problem, hasn’t stopped [Vitalik Buterin from suggesting](https://blokt.com/news/vitalik-buterin-addresses-his-concerns-about-eoss) that the EOS blockchain adopt his version of the Casper protocol to improve its byzantine fault tolerance. If EOS had implemented the Casper protocol before its [mainnet launch](https://eoscountdown.com/), the wealthiest rather than the most popular block producer candidates would make up the majority of the top 21 block producers.\n\nDan Larimer — the founder of EOS — in an article in which he refers to security deposits as bonds, pointed out how Buterin’s [Casper Protocol](http://bytemaster.github.io/2015/08/08/Review-of-Casper-Ethereums-proposed-Proof-of-Stake-Algorithm/) worsens income inequality among participating nodes and thereby increases network centralization:\n\n>The end result of this economic arrangement is that participating in Casper will only be profitable for a small subset of whales, likely a dozen or less. The only way to increase participation would be to increase fees which will primarily pad the pockets of the whales who have the highest margins while the smallest participating stakeholders barely break even.\n\nLarimer concluded his point on the centralizing effects of the Casper protocol with the following observation:\n\n>Casper is an innovative approach that will probably work in the same way that Proof of Work, Peercoin, Nxt, and Ripple all ‘work’: a consensus will be reached, transactions will be confirmed, double spends will be prevented. Unfortunately, it will also fail in the same ways as every system before it: unaccountable centralization of control in the hands of a concentrated minority.\n\nIn the above statement, Larimer described transaction fees as an external source of revenue for block producers. Unlike the proposed Casper Protocol, EOS’ DPOS consensus algorithm funds the activities of block producers with a changeable [monetary inflation rate](https://github.com/EOSIO/Documentation/blob/master/TechnicalWhitePaper.md#block-rewards), which can be described as an internal source of revenue that effectively holds block validators accountable to voters.\n\nSecurity deposits would also make it harder for block producer candidates from poorer countries to join the network. This is a particularly unpalatable idea for EOS, because it’s the world’s first international blockchain democracy and many of its block producer candidates come from less well-off regions of the world, like Latin America and Africa.\n\nButerin had also claimed that [blockchain democracies](https://vitalik.ca/general/2018/03/28/plutocracy.html) are plagued by social problems such as voter bribery and voting cartels — both of which would lead to the creation of a [plutocratic](https://en.wikipedia.org/wiki/Plutocracy) [oligarchy](https://en.wikipedia.org/wiki/Oligarchy). The following quote sums up his argument:\n\n>The flaw in all of this, of course, is that the average voter has only a very small chance of impacting which delegates get selected, and so they only have a very small incentive to vote based on any of these high-minded and lofty goals; rather, their incentive is to vote for whoever offers the highest and most reliable bribe. Attacking is easy. If a cartel equilibrium does not form, then an attacker can simply offer a share percentage slightly higher than 100% (perhaps using fee sharing or some kind of “starter promotion” as justification), capture the majority of delegate positions, and then start an attack. If they get removed from the delegate position via a hard fork, they can simply restart the attack again with a different identity.\n\nThe gist of his argument is fairly sound, but there are a few minor holes in his reasoning. First off, EOS has more block producers who have publicly revealed their identities than any other blockchain democracy. There are far fewer anonymous block producers in EOS than in Bitshares, Steem, and Lisk, which makes vote bribery a much riskier revenue earning strategy in EOS than the aforementioned blockchains. An EOS block producer company caught giving out bribes, could have its reputation permanently damaged and creating a new account wouldn’t help it salvage its reputation, because its members would likely all be publicly known figures. No other democratic blockchain is as transparent as EOS.\n\nSecondly, Buterin readily admits that many of the voters who accept bribes don’t really understand why vote bribing is a bad thing. A re-education program organized by block producers, could easily help voters understand how vote bribing negatively affects a blockchain democracy’s long-term network growth.\n\nVoters who accept bribes risk electing unproductive block producers who do nothing, but confirm transactions. Fairly elected block producers tend to produce a lot of non-profit dapps to strengthen their blockchain’s economic ecosystem. EOS bock producers have, for example, [built](https://eosauthority.com/voting_analytics) [several](http://eosnetworkmonitor.io/) [block](http://eos-bp-votes.dapptools.info/#/block-producers) [explorers](https://votetracker.eosmedi.com/#/) and a [voting tool](https://www.youtube.com/watch?v=TF16fQCuIis), which all make voting; a clear, transparent, and user-friendly process.\n\nThirdly, not all forms of collusion are *bad*. Collusion may sometimes come in the form of productive coalitions in which block producers agree to coordinate their individual efforts into specialized tasks. For example, one block producer can focus its efforts on building a user friendly wallet, while another block producer agrees to focus its attention on building a decentralized exchange. If these two block producers choose to vote for each other with their immensely large stakes, they will in the long-term add value to the network, and inspire confidence in the small investors who make up the majority of the blockchain’s electorate. Collusion is only a bad thing when the majority of a cryptocurrency’s investors cannot hold the blockchain’s block producers accountable for the latter’s misconduct.\n\nSome block producers have already formed small coalitions to finance the development of essential dapps like [Chintai](https://www.chintai-eos.io/): an EOS leasing platform. These kind of coalitions can also help end ideological disagreements, and bring unity to the community. Moreover, voting restrictions make such coalitions more competitive: EOS has about [80 block producer candidates](http://eos-bp-votes.dapptools.info/#/block-producers), but EOS stakeholders cannot vote for more than 30 block producers.\n\n![](https://cdn.steemitimages.com/DQmVAcKWwjKWZXjs1wGsnjQtifbgEZUhkytSo9j1wk9QGMU/image.png)\n\n<center> Block producer coalitions could provide a variety of benefits to EOS’ dapp economy. </center>\n\nEOS also has some additional features to strengthen its democracy such as vote decay, which reduces the value of a given vote over a six month period. Vote decay prevents voter apathy, by forcing stakeholders to continuously evaluate the performance of the block producers they vote for. On the other hand, Block One — the company that developed the code behind the EOS blockchain — readily admits that vote decay is not a perfect way to increase voter activity:\n\n>We recommend that the constitution contain language forbidding the use of automated voting bots as the purpose of vote-decay was to ensure that voters re-evaluate their decisions rather than “set-it and forget it”. While it is not possible to prove the use of bots, it will be possible to prove that people do not use smart contracts to auto-vote.\n\nEOS’ dynamic leadership model can, however; be used to improve its voting algorithm and other protocol limitations. In time, blockchain democracies will come to dominate the crypto-space.\n\n*If you liked this article and would like to support my writing, you can leave a cryptocurrency donation:*\n\n*Bitcoin:* 1HiYu3Q7G9dczPmEtKTUw4dPbNfHJhRgC1\n\n*Bitcoin cash:* qplsmz3m6hvzvnhfusa7zpa477djzp5cpsuewgjgr5\n\n*Ethereum*: 0x9693CBe2D364f1EB6ef7C883d5DBE2562161013f\n\n*Ethereum classic*: 0xDA3caBFe304502f2D2c22eFb59597F38197cC897\n\n*Litecoin:* LKieBwqfQyMcESWDmR8X2d8pHHabzBFsGw\n\n*Dash:* Xqv4C8MtmShLdvJbYZfeZpDXoGF75gaBXb",
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      "body": "![](https://cdn.steemitimages.com/DQmYtugY3e6E2V1YKStjGegeZmCwCwYGYb2u9Zac3Cu8YEr/image.png)\n\nIn July of 2014, the crypto-world was introduced to the idea of a blockchain democracy, when Dan Larimer invented a new consensus algorithm for a decentralized exchange called Bitshares. This algorithm was called delegated proof-of-stake (DPOS) and it had the unusual property of encouraging its users to elect its network’s block producers or masternodes.\n\nFor the first time in blockchain history, the vast majority of a network’s users actually had a say in how its protocol would evolve and adapt to their ever changing needs. Unlike classic blockchain protocols like Bitcoin, Bitshares was not wholly dominated by an unruly and haphazard collection of masternodes called miners.\n\nIn Bitcoin, miners are solely driven by their own selfish self-interest, and are not held accountable to the millions of crypto-investors who happen to use the same network. Mining empty blocks or batches of data with no transaction information, is just one example of the kind of selfish behavior that crypto-investors have come to expect from a proof-of-work governance structure.\n\nSome miners are willing to mine [empty blocks](Vhttps://news.bitcoin.com/reason-bitcoin-miners-empty-blocks/) for the [coinbase reward](https://en.bitcoin.it/wiki/Coinbase) and forgo the transaction fees of filled blocks, because they are afraid of losing all their potential block rewards to competing miners, who might solve the more profitable full blocks before them.\n\nThese kind of miners tend to ignore the growing number of unconfirmed transactions in the blockchain’s memory pool, so that they can mine the less competitive, but empty blocks. Which brings us to an important question: why should crypto-investors transact on a blockchain in which block producers have a financial incentive to ignore their transactions?\n\nBitcoin’s recent surge in popularity, has however; increased the overall [number of full blocks](https://bitcoinmagazine.com/articles/why-do-some-bitcoin-mining-pools-mine-empty-blocks-1468337739/) and made empty block mining an unprofitable affair. But why design a blockchain that encourages such behavior in the first place? And why should block producers have the freedom to prioritize short-term profits over long-term network growth?\n\n![](https://cdn.steemitimages.com/DQmQDyswwVjHRdTEZJYdpC7dvpth2MpZeQa6xqBtvnVDTGW/image.png)\n\n<center> Bitcoin has a [limited supply](https://en.wikipedia.org/wiki/Bitcoin#cite_note-93), which means that the coinbase — the collection of newly minted coins for every block, will keep decreasing until it ceases to exist, and when that happens there will be no incentive to mine empty blocks. </center>\n\nBitcoin apologists might argue that the block producers of DPOS blockchains have the ability to censor transactions, which is worse than having the ability to mine empty blocks. But Bitcoin miners have in fact censored transactions from [blacklisted addresses](https://bitcoinwhoswho.com/blog/2017/11/14/new-blacklisted-bitcoin-address-api/). If DPOS stakeholders dislike the censorship policies of their elected block validators, they can simply vote in another set of block validators. But in proof-of-work protocols, miners can censor the transactions of whichever wallet addresses they deem untrustworthy and they won’t face any repercussions.\n\nAddress blacklisting is in fact, a useful tool that DPOS blockchains can adopt to better govern their networks. Some crypto-maximalists might feel that address blacklisting makes a cryptocurrency less fungible and therefore less valuable as a form of currency, but blockchain democracies like EOS have proven that being able to freeze the accounts of criminals is more important to crypto-investors than having a fully fungible cryptocurrency.\n\nFurthermore, semi-fungible cryptocurrencies have higher market capitalizations and are,therefore; more popular than Monero and other privacy focused coins that harbor [criminal enterprises](https://www.bloomberg.com/news/articles/2018-01-02/criminal-underworld-is-dropping-bitcoin-for-another-currency). And they might become even more popular if future government regimes [publicly support blockchain](https://www.coindesk.com/goodbye-fungibility-ofacs-bitcoin-blacklist-remake-crypto/) democracies that have account blacklisting features.\n\nElections, account freezing, and other democratic actions that dogmatic proof-of-work supporters cry out against, prove that the financial incentives of block producers in DPOS blockchains are aligned with the needs of their respective communities.\n\nElections are in fact, the most essential aspect of blockchain democracies. In Bitshares, and [several other](https://steemit.com/~witnesses) blockchains that have developed various iterations of its consensus algorithm, one can only become a [masternode](https://cryptofresh.com/witnesses) if one has enough votes to become one of the top 30 or [top 21](https://voters.eostitan.com/voters/50/0/21) full node block producers: servers that store the full copy of the blockchain’s history and reap all the financial rewards of being a masternode. To become a partial node, or a stand-by block producer in one of these blockchain democracies, one has to receive enough votes to be in the [top 70](http://eos-bp-votes.dapptools.info/s/api/block-producer-votes-stack-html/1/70) or [top 100](https://steemit.com/~witnesses) elected block validators.\n\nElections determine who can and who cannot become a block producer in DPOS blockchains. And they ensure that the policies that candidate block producers choose to support, have a large impact on whether or not these potential masternodes are actually elected. Whereas consensus protocols that spawn amorphous leadership in blockchain communities like proof-of-work, rarely lead to the adoption of popular policies and often create social inertia.\n\nSome of Bitcoin’s hard forks, were in fact responses to its social inertia or inability to democratically evolve in line with the wishes of its community of investors. These hard forks spawned numerous [competing networks](https://en.wikipedia.org/wiki/List_of_bitcoin_forks) including: Bitcoin Cash, Bitcoin Gold, and Bitcoin Private. It’s hard to take Bitcoin seriously after so many [chain splitting hard forks](https://iconow.net/list-of-bitcoin-forks/).\n\nThe sheer number of these hard forks, also brings into question the idea that proof-of-work is the “most secure” consensus protocol ever invented. This obsession with protocol security, is however; a distraction from one of blockchain technology’s most useful attributes: decentralized leadership.\n\nA consensus protocol’s security mechanism should serve the needs of its leadership, rather than have its leadership serve the needs of a dogmatic faith in decentralized financial security.\n\n![](https://cdn.steemitimages.com/DQmddPhirVTsCgrZZtwChzp8ta6x2fMuBiWosEaMEJXEjEm/image.png)\n\n<center>In Bitcoin we trust. </center>\n\nMany miners and software developers tried to establish themselves as the [leaders of the Bitcoin community](https://medium.com/@bergealex4/on-extended-communication-failures-5ffb6fcc6b89), but their efforts failed and they instead created chain splitting hard forks to achieve their respective goals.\n\nBitcoin’s decentralized decision making structure, the [*Bitcoin Improvement Proposal* (BIP)](https://github.com/bitcoin/bips), failed to [unite its developers](https://medium.com/@bergealex4/the-tao-of-bitcoin-development-ff093c6155cd); even with the promise of funding from private companies like purse.io, and more chain splitting hard forks followed suit. Unlike Blockchain democracies, proof-of-work protocols cannot directly fund software development with [monetary inflation](https://en.wikipedia.org/wiki/Monetary_inflation), and this makes them less coordinated than their DPOS counterparts.\n\nEven after protocol changes such as [BIP 9 ](https://github.com/bitcoin/bips/blob/master/bip-0009.mediawiki)— a method for broadcasting imminent or ongoing soft forks to the entire network — which set the foundations for a potential Bitcoin governance structure , Bitcoin developers still haven’t managed to create a coherent leadership model.\n\nSome crypto-maximalists believe that any attempt to create a governance structure violates the trustless nature of blockchain technology. But this point of view could not be farther from the truth. Like the complex cryptography that underpins blockchain accounting, governance structures make it easier for the general public to trust protocol changes that receive grassroots support.\n\nFurthermore, many developers eventually realized that Bitcoin miners often place their own interests above the needs of the community. This was especially true for a feature called Segregated Witness: a protocol change that would remove Bitcoin’s block size limit and increase its transaction speed. Bitcoin’s community tried to use its User Activated Soft Work (UASF) feature — a social method for initiating protocol changes— to launch Segregated Witness as a soft fork, but their efforts ultimately failed.\n\n![](https://cdn.steemitimages.com/DQmehUcY2vGb6HzyEB7pXvmrFEdZ9o9yNy88CB3cTDJs6Be/image.png)\n\n<center> Blockchain miners make terrible leaders </center>\n\nMuch of the social inertia seen in Bitcoin’s protocol developments was the result of a misalignment of incentives and interests between miners and everyone else who happened to use its blockchain.\n\nSocial inertia may also explain why, after 4 years since Ethereum’s founder, Vitalik Buterin — first [suggested a protocol change](https://blog.ethereum.org/2014/07/05/stake/), Ethereum still hasn’t transitioned to a proof-of-stake consensus algorithm. To make matters worse, Ether’s phenomenal price rise at the beginning of the year, drew the attention of avid cryptocurrency miners — who then raised its [hashrate difficulty](https://etherscan.io/chart/difficulty). Ether mining is [no longer profitable](https://www.tomshardware.com/news/ethereum-profitability-down-difficulty-up,36691.html), but Ethereum’s miners still won’t fork the blockchain to a proof-of-stake protocol.\n\nSome Ethereum miners might be waiting for miners with smaller or cheaper mining rigs to drop out of the mining race as soon as the mining difficulty reaches a certain level. But the lack of protocol development may cause Ether’s price to drop, which would make this bullish strategy unprofitable and pointless.\n\nSome diehard Ethereum supporters might argue that its developers needed more time to further develop [Casper](https://cointelegraph.com/news/casper-what-is-known-about-the-new-ethereums-network-upgrade): the suggested protocol upgrade. There are [two different versions](https://www.trustnodes.com/2018/08/16/vitalik-buterin-tells-story-race-vlad-zamfir-implement-proof-stake-casper) of Casper being proposed: Vitalik Buterin’s Friendly Finality Gadget (FFG) — a hybrid PoW/PoS consensus mechanism, and Vlad Zamfir’s Correct-by-Construction — a full PoS consensus algorithm in which the validity of a new competing chain is determined by the number of nodes who agree on the correctness of said chain rather than how closely related its new blocks are to the genesis block (the first block or batch of transactions in the Ethereum blockchain).\n\nRegardless of which version of Casper they choose to implement, they will still have to convince miners that they can replace Ethereum’s proof-of-work with a perfect proof-of-stake algorithm. Ethereum’s development team have in fact, spent years trying to convince miners that Ethereum needs a new and more efficient consensus mechanism, even though the proof-of-stake protocol could have been implemented incrementally. If Ether investors could vote on Ethereum’s protocol, they would have probably agreed to a progressive switch to proof-of-stake.\n\nMiners’ irrational fear of a protocol change has forced Ethereum’s development team to tackle highly improbable problems that real world proof-of-stake blockchains have never faced. These theoretical problems include the dreaded [long-range attack](https://blog.ethereum.org/2016/12/07/history-casper-chapter-2/) and the infamous nothing at [stake dilemma](https://blog.ethereum.org/2014/07/05/stake/). The latter problem — which some developers believe is entirely fictional — is especially unlikely to occur, because block validators in any kind of consensus protocol, have to forgo more than one opportunity cost, when they decide to fork a given blockchain.\n\nIn a traditional proof-of-work protocol, miners are faced with two principal costs when they decide to fork the blockchain in question: the cost of creating new blocks on the new chain and the forgone block rewards that they would have received if they continued mining the old chain. If the new coin of their forked network is ignored by most investors — and the price of said coin is sufficiently low — they will have not only wasted their mining rigs’ power, but also forgone the opportunity to continue earning block rewards on the previous chain. Moreover, the block rewards of the new chain may be far lower than the rewards of the old chain.\n\nThe nothing at stake problem, which could be more accurately described as the multi-chain production problem, is about proof-of-stake block producers having the ability to simultaneously produce blocks for multiple chains without incurring any costs for every new block they validate. But they will, however; incur the cost of managing a more expensive server because each new chain will require more RAM to process transactions, and more hard disk space to download some of, if not the entirety of, the blockchain’s transaction history.\n\nThe idea that proof-of-stake block validators have “nothing at stake” when they produce blocks for multiple chains, ignores the fact that server costs increase as a blockchain network’s activity grows. Ethereum’s network activity, has for example, [grown to the point](https://hackernoon.com/the-ethereum-blockchain-size-has-exceeded-1tb-and-yes-its-an-issue-2b650b5f4f62) that many stand-by block producers cannot afford to manage the server costs of their partial nodes. Producing blocks for multiple chains increases one’s server costs, regardless of which consensus algorithm the network in question uses.\n\nPedantic commentators, might argue that the sunk cost of buying or creating a server and upgrading it when the blockchain grows in size, is far less than the accumulated cost of producing new blocks in a new chain. But it would be disingenuous to say that there is no cost, whatsoever, for producing multiple chains in proof-of-stake protocols.\n\nDPOS blockchains make multi-block production even more expensive by forcing block validators to spend time and energy convincing stakeholders to vote for them. Block producers who attempt to start a new chain or a competing network have to convince the stakeholders who had previously voted for them to run the old chain, to vote for each and every new chain they create. DPOS thereby solves the nothing at stake problem by introducing the social cost of garnering votes. There are real tangible costs to managing several social media accounts with thousands of followers, and building free to use applications, in the process of garnering stakeholder votes.\n\nTo solve the imaginary nothing at stake problem, Buterin and Zamfir developed the idea of the [slasher protocol](https://blog.ethereum.org/2014/01/15/slasher-a-punitive-proof-of-stake-algorithm/), which will force new block validators in a proof-of-stake version of Ethereum to have security deposits. If some of these block producers try to validate more than one chain of blocks at a time, they will lose their security deposit: the stake they had bought to become block validators.\n\nThe fanatical desire to maintain a proof-of-work algorithm has forced Ethereum’s development team to cook up novel proof-of-stake problems to please their blockchain’s miners. While some problems like [weak subjectivity](https://blog.ethereum.org/2014/11/25/proof-stake-learned-love-weak-subjectivity/) — the idea that many proof-of-stake block validators stay online intermittently to validate blocks — are legitimate decentralization problems, other factors such as speed and scalability might have a greater long-term impact on mainstream blockchain adoption.\n\nProof-of-work blockchains have, however; proven less secure than the proof-of-stake protocols that Ethereum’s development team have been trying to improve. Miners had, for example, double spent millions of dollars worth of [Bitcoin Cash](https://www.trustnodes.com/2018/05/24/bitcoin-gold-51-attacked-18-million-stolen-double-spends) when they realized that because it was a new coin; too few miners were mining it, and its resulting hashrate difficulty was low enough to be taken advantage of.\n\n![](https://cdn.steemitimages.com/DQmem7EtijrSCj2NnXLECs4XNXAMoEpLd8ty2cnswDkcB7Q/image.png)\n\n<center> A hacker needs only 51% of a proof-of-work coin’s hashing power to launch a double spend attack, but it would cost him more to launch the same kind of attack on a proof-of-stake coin because it would cost him 51% of that coin’s market capitalization. </center>\n\nDPOS blockchains have the same security features as proof-of-stake coins in addition to having a clear governance structure and being [orders of magnitude faster](https://www.trustnodes.com/2018/07/15/eos-hits-1200-transactions-per-second-ethereum-suddenly-faces-congestion). The [scalability trilemma](https://bitcoinist.com/breaking-down-the-scalability-trilemma/) makes DPOS blockchains, which have fewer nodes, faster but less decentralized than PoW and PoS protocols.\n\nUnfortunately for Ethereum’s most fervent advocates, its founder — Vitalik Buterin — seems to care more about security than speed and decentralization. Unbeknownst, to most Ether investors, any applied iteration of the PoS Casper protocol would produce an outcome in which most nodes would be unable to afford the security deposits required by the network and only the richest investors would continue to manage the nodes of the Ethereum blockchain. This is exactly what happen when Dash’s [price rise](https://coincodex.com/crypto/dash/) made becoming a [masternode](https://www.dash.org/masternodes/) extraordinarily [expensive](https://www.reddit.com/r/dashpay/comments/7dm9iu/cost_of_runningowning_a_masternode_420k_right_now/).\n\nSecurity deposits would also worsen the centralizing effects of Ethereum’s network growth. This subtle, but inevitable problem, hasn’t stopped [Vitalik Buterin from suggesting](https://blokt.com/news/vitalik-buterin-addresses-his-concerns-about-eoss) that the EOS blockchain adopt his version of the Casper protocol to improve its byzantine fault tolerance. If EOS had implemented the Casper protocol before its [mainnet launch](https://eoscountdown.com/), the wealthiest rather than the most popular block producer candidates would make up the majority of the top 21 block producers.\n\nDan Larimer — the founder of EOS — in an article in which he refers to security deposits as bonds, pointed out how Buterin’s [Casper Protocol](http://bytemaster.github.io/2015/08/08/Review-of-Casper-Ethereums-proposed-Proof-of-Stake-Algorithm/) worsens income inequality among participating nodes and thereby increases network centralization:\n\n>The end result of this economic arrangement is that participating in Casper will only be profitable for a small subset of whales, likely a dozen or less. The only way to increase participation would be to increase fees which will primarily pad the pockets of the whales who have the highest margins while the smallest participating stakeholders barely break even.\n\nLarimer concluded his point on the centralizing effects of the Casper protocol with the following observation:\n\n>Casper is an innovative approach that will probably work in the same way that Proof of Work, Peercoin, Nxt, and Ripple all ‘work’: a consensus will be reached, transactions will be confirmed, double spends will be prevented. Unfortunately, it will also fail in the same ways as every system before it: unaccountable centralization of control in the hands of a concentrated minority.\n\nIn the above statement, Larimer described transaction fees as an external source of revenue for block producers. Unlike the proposed Casper Protocol, EOS’ DPOS consensus algorithm funds the activities of block producers with a changeable [monetary inflation rate](https://github.com/EOSIO/Documentation/blob/master/TechnicalWhitePaper.md#block-rewards), which can be described as an internal source of revenue that effectively holds block validators accountable to voters.\n\nSecurity deposits would also make it harder for block producer candidates from poorer countries to join the network. This is a particularly unpalatable idea for EOS, because it’s the world’s first international blockchain democracy and many of its block producer candidates come from less well-off regions of the world, like Latin America and Africa.\n\nButerin had also claimed that [blockchain democracies](https://vitalik.ca/general/2018/03/28/plutocracy.html) are plagued by social problems such as voter bribery and voting cartels — both of which would lead to the creation of a [plutocratic](https://en.wikipedia.org/wiki/Plutocracy) [oligarchy](https://en.wikipedia.org/wiki/Oligarchy). The following quote sums up his argument:\n\n>The flaw in all of this, of course, is that the average voter has only a very small chance of impacting which delegates get selected, and so they only have a very small incentive to vote based on any of these high-minded and lofty goals; rather, their incentive is to vote for whoever offers the highest and most reliable bribe. Attacking is easy. If a cartel equilibrium does not form, then an attacker can simply offer a share percentage slightly higher than 100% (perhaps using fee sharing or some kind of “starter promotion” as justification), capture the majority of delegate positions, and then start an attack. If they get removed from the delegate position via a hard fork, they can simply restart the attack again with a different identity.\n\nThe gist of his argument is fairly sound, but there are a few minor holes in his reasoning. First off, EOS has more block producers who have publicly revealed their identities than any other blockchain democracy. There are far fewer anonymous block producers in EOS than in Bitshares, Steem, and Lisk, which makes vote bribery a much riskier revenue earning strategy in EOS than the aforementioned blockchains. An EOS block producer company caught giving out bribes, could have its reputation permanently damaged and creating a new account wouldn’t help it salvage its reputation, because its members would likely all be publicly known figures. No other democratic blockchain is as transparent as EOS.\n\nSecondly, Buterin readily admits that many of the voters who accept bribes don’t really understand why vote bribing is a bad thing. A re-education program organized by block producers, could easily help voters understand how vote bribing negatively affects a blockchain democracy’s long-term network growth.\n\nVoters who accept bribes risk electing unproductive block producers who do nothing, but confirm transactions. Fairly elected block producers tend to produce a lot of non-profit dapps to strengthen their blockchain’s economic ecosystem. EOS bock producers have, for example, [built](https://eosauthority.com/voting_analytics) [several](http://eosnetworkmonitor.io/) [block](http://eos-bp-votes.dapptools.info/#/block-producers) [explorers](https://votetracker.eosmedi.com/#/) and a [voting tool](https://www.youtube.com/watch?v=TF16fQCuIis), which all make voting; a clear, transparent, and user-friendly process.\n\nThirdly, not all forms of collusion are *bad*. Collusion may sometimes come in the form of productive coalitions in which block producers agree to coordinate their individual efforts into specialized tasks. For example, one block producer can focus its efforts on building a user friendly wallet, while another block producer agrees to focus its attention on building a decentralized exchange. If these two block producers choose to vote for each other with their immensely large stakes, they will in the long-term add value to the network, and inspire confidence in the small investors who make up the majority of the blockchain’s electorate. Collusion is only a bad thing when the majority of a cryptocurrency’s investors cannot hold the blockchain’s block producers accountable for the latter’s misconduct.\n\nSome block producers have already formed small coalitions to finance the development of essential dapps like [Chintai](https://www.chintai-eos.io/): an EOS leasing platform. These kind of coalitions can also help end ideological disagreements, and bring unity to the community. Moreover, voting restrictions make such coalitions more competitive: EOS has about [80 block producer candidates](http://eos-bp-votes.dapptools.info/#/block-producers), but EOS stakeholders cannot vote for more than 30 block producers.\n\n![](https://cdn.steemitimages.com/DQmVAcKWwjKWZXjs1wGsnjQtifbgEZUhkytSo9j1wk9QGMU/image.png)\n\n<center> Block producer coalitions could provide a variety of benefits to EOS’ dapp economy. </center>\n\nEOS also has some additional features to strengthen its democracy such as vote decay, which reduces the value of a given vote over a six month period. Vote decay prevents voter apathy, by forcing stakeholders to continuously evaluate the performance of the block producers they vote for. On the other hand, Block One — the company that developed the code behind the EOS blockchain — readily admits that vote decay is not a perfect way to increase voter activity:\n\n>We recommend that the constitution contain language forbidding the use of automated voting bots as the purpose of vote-decay was to ensure that voters re-evaluate their decisions rather than “set-it and forget it”. While it is not possible to prove the use of bots, it will be possible to prove that people do not use smart contracts to auto-vote.\n\nEOS’ dynamic leadership model can, however; be used to improve its voting algorithm and other protocol limitations. In time, blockchain democracies will come to dominate the crypto-space.\n\n*If you liked this article and would like to support my writing, you can leave a cryptocurrency donation:*\n\n*Bitcoin:* 1HiYu3Q7G9dczPmEtKTUw4dPbNfHJhRgC1\n\n*Bitcoin cash:* qplsmz3m6hvzvnhfusa7zpa477djzp5cpsuewgjgr5\n\n*Ethereum*: 0x9693CBe2D364f1EB6ef7C883d5DBE2562161013f\n\n*Ethereum classic*: 0xDA3caBFe304502f2D2c22eFb59597F38197cC897\n\n*Litecoin:* LKieBwqfQyMcESWDmR8X2d8pHHabzBFsGw\n\n*Dash:* Xqv4C8MtmShLdvJbYZfeZpDXoGF75gaBXb",
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      "body": "![](https://cdn.steemitimages.com/DQmYtugY3e6E2V1YKStjGegeZmCwCwYGYb2u9Zac3Cu8YEr/image.png)\n\nIn July of 2014, the crypto-world was introduced to the idea of a blockchain democracy, when Dan Larimer invented a new consensus algorithm for a decentralized exchange called Bitshares. This algorithm was called delegated proof-of-stake (DPOS) and it had the unusual property of forcing its users to elect its network’s block producers or masternodes.\n\nFor the first time in blockchain history, the vast majority of a network’s users actually had a say in how its protocol would evolve and adapt to their ever changing needs. Unlike classic blockchain protocols like Bitcoin, Bitshares was not wholly dominated by an unruly and haphazard collection of masternodes called miners.\n\nIn Bitcoin, miners are solely driven by their own selfish self-interest, and are not held accountable to the millions of crypto-investors who happen to use the same network. Mining empty blocks or batches of data with no transaction information, is just one example of the kind of selfish behavior that crypto-investors have come to expect from a proof-of-work governance structure.\n\nSome miners are willing to mine [empty blocks](Vhttps://news.bitcoin.com/reason-bitcoin-miners-empty-blocks/) for the [coinbase reward](https://en.bitcoin.it/wiki/Coinbase) and forgo the transaction fees of filled blocks, because they are afraid of losing all their potential block rewards to competing miners, who might solve the more profitable full blocks before them.\n\nThese kind of miners tend to ignore the growing number of unconfirmed transactions in the blockchain’s memory pool, so that they can mine the less competitive, but empty blocks. Which brings us to an important question: why should crypto-investors transact on a blockchain in which block producers have a financial incentive to ignore their transactions?\n\nBitcoin’s recent surge in popularity, has however; increased the overall [number of full blocks](https://bitcoinmagazine.com/articles/why-do-some-bitcoin-mining-pools-mine-empty-blocks-1468337739/) and made empty block mining an unprofitable affair. But why design a blockchain that encourages such behavior in the first place? And why should block producers have the freedom to prioritize short-term profits over long-term network growth?\n\n![](https://cdn.steemitimages.com/DQmQDyswwVjHRdTEZJYdpC7dvpth2MpZeQa6xqBtvnVDTGW/image.png)\n\n<center> Bitcoin has a [limited supply](https://en.wikipedia.org/wiki/Bitcoin#cite_note-93), which means that the coinbase — the collection of newly minted coins for every block, will keep decreasing until it ceases to exist, and when that happens there will be no incentive to mine empty blocks. </center>\n\nBitcoin apologists might argue that the block producers of DPOS blockchains have the ability to censor transactions, which is worse than having the ability to mine empty blocks. But Bitcoin miners have in fact censored transactions from [blacklisted addresses](https://bitcoinwhoswho.com/blog/2017/11/14/new-blacklisted-bitcoin-address-api/). If DPOS stakeholders dislike the censorship policies of their elected block validators, they can simply vote in another set of block validators. But in proof-of-work protocols, miners can censor the transactions of whichever wallet addresses they deem untrustworthy and they won’t face any repercussions.\n\nAddress blacklisting is in fact, a useful tool that DPOS blockchains can adopt to better govern their networks. Some crypto-maximalists might feel that address blacklisting makes a cryptocurrency less fungible and therefore less valuable as a form of currency, but blockchain democracies like EOS have proven that being able to freeze the accounts of criminals is more important to crypto-investors than having a fully fungible cryptocurrency.\n\nFurthermore, semi-fungible cryptocurrencies have higher market capitalizations and are,therefore; more popular than Monero and other privacy focused coins that harbor [criminal enterprises](https://www.bloomberg.com/news/articles/2018-01-02/criminal-underworld-is-dropping-bitcoin-for-another-currency). And they might become even more popular if future government regimes [publicly support blockchain](https://www.coindesk.com/goodbye-fungibility-ofacs-bitcoin-blacklist-remake-crypto/) democracies that have account blacklisting features.\n\nElections, account freezing, and other democratic actions that dogmatic proof-of-work supporters cry out against, prove that the financial incentives of block producers in DPOS blockchains are aligned with the needs of their respective communities.\n\nElections are in fact, the most essential aspect of blockchain democracies. In Bitshares, and [several other](https://steemit.com/~witnesses) blockchains that have developed various iterations of its consensus algorithm, one can only become a [masternode](https://cryptofresh.com/witnesses) if one has enough votes to become one of the top 30 or [top 21](https://voters.eostitan.com/voters/50/0/21) full node block producers: servers that store the full copy of the blockchain’s history and reap all the financial rewards of being a masternode. To become a partial node, or a stand-by block producer in one of these blockchain democracies, one has to receive enough votes to be in the [top 70](http://eos-bp-votes.dapptools.info/s/api/block-producer-votes-stack-html/1/70) or [top 100](https://steemit.com/~witnesses) elected block validators.\n\nElections determine who can and who cannot become a block producer in DPOS blockchains. And they ensure that the policies that candidate block producers choose to support, have a large impact on whether or not these potential masternodes are actually elected. Whereas consensus protocols that spawn amorphous leadership in blockchain communities like proof-of-work, rarely lead to the adoption of popular policies and often create social inertia.\n\nSome of Bitcoin’s hard forks, were in fact responses to its social inertia or inability to democratically evolve in line with the wishes of its community of investors. These hard forks spawned numerous [competing networks](https://en.wikipedia.org/wiki/List_of_bitcoin_forks) including: Bitcoin Cash, Bitcoin Gold, and Bitcoin Private. It’s hard to take Bitcoin seriously after so many [chain splitting hard forks](https://iconow.net/list-of-bitcoin-forks/).\n\nThe sheer number of these hard forks, also brings into question the idea that proof-of-work is the “most secure” consensus protocol ever invented. This obsession with protocol security, is however; a distraction from one of blockchain technology’s most useful attributes: decentralized leadership.\n\nA consensus protocol’s security mechanism should serve the needs of its leadership, rather than have its leadership serve the needs of a dogmatic faith in decentralized financial security.\n\n![](https://cdn.steemitimages.com/DQmddPhirVTsCgrZZtwChzp8ta6x2fMuBiWosEaMEJXEjEm/image.png)\n\n<center>In Bitcoin we trust. </center>\n\nMany miners and software developers tried to establish themselves as the [leaders of the Bitcoin community](https://medium.com/@bergealex4/on-extended-communication-failures-5ffb6fcc6b89), but their efforts failed and they instead created chain splitting hard forks to achieve their respective goals.\n\nBitcoin’s decentralized decision making structure, the [*Bitcoin Improvement Proposal* (BIP)](https://github.com/bitcoin/bips), failed to [unite its developers](https://medium.com/@bergealex4/the-tao-of-bitcoin-development-ff093c6155cd); even with the promise of funding from private companies like purse.io, and more chain splitting hard forks followed suit. Unlike Blockchain democracies, proof-of-work protocols cannot directly fund software development with [monetary inflation](https://en.wikipedia.org/wiki/Monetary_inflation), and this makes them less coordinated than their DPOS counterparts.\n\nEven after protocol changes such as [BIP 9 ](https://github.com/bitcoin/bips/blob/master/bip-0009.mediawiki)— a method for broadcasting imminent or ongoing soft forks to the entire network — which set the foundations for a potential Bitcoin governance structure , Bitcoin developers still haven’t managed to create a coherent leadership model.\n\nSome crypto-maximalists believe that any attempt to create a governance structure violates the trustless nature of blockchain technology. But this point of view could not be farther from the truth. Like the complex cryptography that underpins blockchain accounting, governance structures make it easier for the general public to trust protocol changes that receive grassroots support.\n\nFurthermore, many developers eventually realized that Bitcoin miners often place their own interests above the needs of the community. This was especially true for a feature called Segregated Witness: a protocol change that would remove Bitcoin’s block size limit and increase its transaction speed. Bitcoin’s community tried to use its User Activated Soft Work (UASF) feature — a social method for initiating protocol changes— to launch Segregated Witness as a soft fork, but their efforts ultimately failed.\n\n![](https://cdn.steemitimages.com/DQmehUcY2vGb6HzyEB7pXvmrFEdZ9o9yNy88CB3cTDJs6Be/image.png)\n\n<center> Blockchain miners make terrible leaders </center>\n\nMuch of the social inertia seen in Bitcoin’s protocol developments was the result of a misalignment of incentives and interests between miners and everyone else who happened to use its blockchain.\n\nSocial inertia may also explain why, after 4 years since Ethereum’s founder, Vitalik Buterin — first [suggested a protocol change](https://blog.ethereum.org/2014/07/05/stake/), Ethereum still hasn’t transitioned to a proof-of-stake consensus algorithm. To make matters worse, Ether’s phenomenal price rise at the beginning of the year, drew the attention of avid cryptocurrency miners — who then raised its [hashrate difficulty](https://etherscan.io/chart/difficulty). Ether mining is [no longer profitable](https://www.tomshardware.com/news/ethereum-profitability-down-difficulty-up,36691.html), but Ethereum’s miners still won’t fork the blockchain to a proof-of-stake protocol.\n\nSome Ethereum miners might be waiting for miners with smaller or cheaper mining rigs to drop out of the mining race as soon as the mining difficulty reaches a certain level. But the lack of protocol development may cause Ether’s price to drop, which would make this bullish strategy unprofitable and pointless.\n\nSome diehard Ethereum supporters might argue that its developers needed more time to further develop [Casper](https://cointelegraph.com/news/casper-what-is-known-about-the-new-ethereums-network-upgrade): the suggested protocol upgrade. There are [two different versions](https://www.trustnodes.com/2018/08/16/vitalik-buterin-tells-story-race-vlad-zamfir-implement-proof-stake-casper) of Casper being proposed: Vitalik Buterin’s Friendly Finality Gadget (FFG) — a hybrid PoW/PoS consensus mechanism, and Vlad Zamfir’s Correct-by-Construction — a full PoS consensus algorithm in which the validity of a new competing chain is determined by the number of nodes who agree on the correctness of said chain rather than how closely related its new blocks are to the genesis block (the first block or batch of transactions in the Ethereum blockchain).\n\nRegardless of which version of Casper they choose to implement, they will still have to convince miners that they can replace Ethereum’s proof-of-work with a perfect proof-of-stake algorithm. Ethereum’s development team have in fact, spent years trying to convince miners that Ethereum needs a new and more efficient consensus mechanism, even though the proof-of-stake protocol could have been implemented incrementally. If Ether investors could vote on Ethereum’s protocol, they would have probably agreed to a progressive switch to proof-of-stake.\n\nMiners’ irrational fear of a protocol change has forced Ethereum’s development team to tackle highly improbable problems that real world proof-of-stake blockchains have never faced. These theoretical problems include the dreaded [long-range attack](https://blog.ethereum.org/2016/12/07/history-casper-chapter-2/) and the infamous nothing at [stake dilemma](https://blog.ethereum.org/2014/07/05/stake/). The latter problem — which some developers believe is entirely fictional — is especially unlikely to occur, because block validators in any kind of consensus protocol, have to forgo more than one opportunity cost, when they decide to fork a given blockchain.\n\nIn a traditional proof-of-work protocol, miners are faced with two principal costs when they decide to fork the blockchain in question: the cost of creating new blocks on the new chain and the forgone block rewards that they would have received if they continued mining the old chain. If the new coin of their forked network is ignored by most investors — and the price of said coin is sufficiently low — they will have not only wasted their mining rigs’ power, but also forgone the opportunity to continue earning block rewards on the previous chain. Moreover, the block rewards of the new chain may be far lower than the rewards of the old chain.\n\nThe nothing at stake problem, which could be more accurately described as the multi-chain production problem, is about proof-of-stake block producers having the ability to simultaneously produce blocks for multiple chains without incurring any costs for every new block they validate. But they will, however; incur the cost of managing a more expensive server because each new chain will require more RAM to process transactions, and more hard disk space to download some of, if not the entirety of, the blockchain’s transaction history.\n\nThe idea that proof-of-stake block validators have “nothing at stake” when they produce blocks for multiple chains, ignores the fact that server costs increase as a blockchain network’s activity grows. Ethereum’s network activity, has for example, [grown to the point](https://hackernoon.com/the-ethereum-blockchain-size-has-exceeded-1tb-and-yes-its-an-issue-2b650b5f4f62) that many stand-by block producers cannot afford to manage the server costs of their partial nodes. Producing blocks for multiple chains increases one’s server costs, regardless of which consensus algorithm the network in question uses.\n\nPedantic commentators, might argue that the sunk cost of buying or creating a server and upgrading it when the blockchain grows in size, is far less than the accumulated cost of producing new blocks in a new chain. But it would be disingenuous to say that there is no cost, whatsoever, for producing multiple chains in proof-of-stake protocols.\n\nDPOS blockchains make multi-block production even more expensive by forcing block validators to spend time and energy convincing stakeholders to vote for them. Block producers who attempt to start a new chain or a competing network have to convince the stakeholders who had previously voted for them to run the old chain, to vote for each and every new chain they create. DPOS thereby solves the nothing at stake problem by introducing the social cost of garnering votes. There are real tangible costs to managing several social media accounts with thousands of followers, and building free to use applications, in the process of garnering stakeholder votes.\n\nTo solve the imaginary nothing at stake problem, Buterin and Zamfir developed the idea of the [slasher protocol](https://blog.ethereum.org/2014/01/15/slasher-a-punitive-proof-of-stake-algorithm/), which will force new block validators in a proof-of-stake version of Ethereum to have security deposits. If some of these block producers try to validate more than one chain of blocks at a time, they will lose their security deposit: the stake they had bought to become block validators.\n\nThe fanatical desire to maintain a proof-of-work algorithm has forced Ethereum’s development team to cook up novel proof-of-stake problems to please their blockchain’s miners. While some problems like [weak subjectivity](https://blog.ethereum.org/2014/11/25/proof-stake-learned-love-weak-subjectivity/) — the idea that many proof-of-stake block validators stay online intermittently to validate blocks — are legitimate decentralization problems, other factors such as speed and scalability might have a greater long-term impact on mainstream blockchain adoption.\n\nProof-of-work blockchains have, however; proven less secure than the proof-of-stake protocols that Ethereum’s development team have been trying to improve. Miners had, for example, double spent millions of dollars worth of [Bitcoin Cash](https://www.trustnodes.com/2018/05/24/bitcoin-gold-51-attacked-18-million-stolen-double-spends) when they realized that because it was a new coin; too few miners were mining it, and its resulting hashrate difficulty was low enough to be taken advantage of.\n\n![](https://cdn.steemitimages.com/DQmem7EtijrSCj2NnXLECs4XNXAMoEpLd8ty2cnswDkcB7Q/image.png)\n\n<center> A hacker needs only 51% of a proof-of-work coin’s hashing power to launch a double spend attack, but it would cost him more to launch the same kind of attack on a proof-of-stake coin because it would cost him 51% of that coin’s market capitalization. </center>\n\nDPOS blockchains have the same security features as proof-of-stake coins in addition to having a clear governance structure and being [orders of magnitude faster](https://www.trustnodes.com/2018/07/15/eos-hits-1200-transactions-per-second-ethereum-suddenly-faces-congestion). The [scalability trilemma](https://bitcoinist.com/breaking-down-the-scalability-trilemma/) makes DPOS blockchains, which have fewer nodes, faster but less decentralized than PoW and PoS protocols.\n\nUnfortunately for Ethereum’s most fervent advocates, its founder — Vitalik Buterin — seems to care more about security than speed and decentralization. Unbeknownst, to most Ether investors, any applied iteration of the PoS Casper protocol would produce an outcome in which most nodes would be unable to afford the security deposits required by the network and only the richest investors would continue to manage the nodes of the Ethereum blockchain. This is exactly what happen when Dash’s [price rise](https://coincodex.com/crypto/dash/) made becoming a [masternode](https://www.dash.org/masternodes/) extraordinarily [expensive](https://www.reddit.com/r/dashpay/comments/7dm9iu/cost_of_runningowning_a_masternode_420k_right_now/).\n\nSecurity deposits would also worsen the centralizing effects of Ethereum’s network growth. This subtle, but inevitable problem, hasn’t stopped [Vitalik Buterin from suggesting](https://blokt.com/news/vitalik-buterin-addresses-his-concerns-about-eoss) that the EOS blockchain adopt his version of the Casper protocol to improve its byzantine fault tolerance. If EOS had implemented the Casper protocol before its [mainnet launch](https://eoscountdown.com/), the wealthiest rather than the most popular block producer candidates would make up the majority of the top 21 block producers.\n\nDan Larimer — the founder of EOS — in an article in which he refers to security deposits as bonds, pointed out how Buterin’s [Casper Protocol](http://bytemaster.github.io/2015/08/08/Review-of-Casper-Ethereums-proposed-Proof-of-Stake-Algorithm/) worsens income inequality among participating nodes and thereby increases network centralization:\n\n>The end result of this economic arrangement is that participating in Casper will only be profitable for a small subset of whales, likely a dozen or less. The only way to increase participation would be to increase fees which will primarily pad the pockets of the whales who have the highest margins while the smallest participating stakeholders barely break even.\n\nLarimer concluded his point on the centralizing effects of the Casper protocol with the following observation:\n\n>Casper is an innovative approach that will probably work in the same way that Proof of Work, Peercoin, Nxt, and Ripple all ‘work’: a consensus will be reached, transactions will be confirmed, double spends will be prevented. Unfortunately, it will also fail in the same ways as every system before it: unaccountable centralization of control in the hands of a concentrated minority.\n\nIn the above statement, Larimer described transaction fees as an external source of revenue for block producers. Unlike the proposed Casper Protocol, EOS’ DPOS consensus algorithm funds the activities of block producers with a changeable [monetary inflation rate](https://github.com/EOSIO/Documentation/blob/master/TechnicalWhitePaper.md#block-rewards), which can be described as an internal source of revenue that effectively holds block validators accountable to voters.\n\nSecurity deposits would also make it harder for block producer candidates from poorer countries to join the network. This is a particularly unpalatable idea for EOS, because it’s the world’s first international blockchain democracy and many of its block producer candidates come from less well-off regions of the world, like Latin America and Africa.\n\nButerin had also claimed that [blockchain democracies](https://vitalik.ca/general/2018/03/28/plutocracy.html) are plagued by social problems such as voter bribery and voting cartels — both of which would lead to the creation of a [plutocratic](https://en.wikipedia.org/wiki/Plutocracy) [oligarchy](https://en.wikipedia.org/wiki/Oligarchy). The following quote sums up his argument:\n\n>The flaw in all of this, of course, is that the average voter has only a very small chance of impacting which delegates get selected, and so they only have a very small incentive to vote based on any of these high-minded and lofty goals; rather, their incentive is to vote for whoever offers the highest and most reliable bribe. Attacking is easy. If a cartel equilibrium does not form, then an attacker can simply offer a share percentage slightly higher than 100% (perhaps using fee sharing or some kind of “starter promotion” as justification), capture the majority of delegate positions, and then start an attack. If they get removed from the delegate position via a hard fork, they can simply restart the attack again with a different identity.\n\nThe gist of his argument is fairly sound, but there are a few minor holes in his reasoning. First off, EOS has more block producers who have publicly revealed their identities than any other blockchain democracy. There are far fewer anonymous block producers in EOS than in Bitshares, Steem, and Lisk, which makes vote bribery a much riskier revenue earning strategy in EOS than the aforementioned blockchains. An EOS block producer company caught giving out bribes, could have its reputation permanently damaged and creating a new account wouldn’t help it salvage its reputation, because its members would likely all be publicly known figures. No other democratic blockchain is as transparent as EOS.\n\nSecondly, Buterin readily admits that many of the voters who accept bribes don’t really understand why vote bribing is a bad thing. A re-education program organized by block producers, could easily help voters understand how vote bribing negatively affects a blockchain democracy’s long-term network growth.\n\nVoters who accept bribes risk electing unproductive block producers who do nothing, but confirm transactions. Fairly elected block producers tend to produce a lot of non-profit dapps to strengthen their blockchain’s economic ecosystem. EOS bock producers have, for example, [built](https://eosauthority.com/voting_analytics) [several](http://eosnetworkmonitor.io/) [block](http://eos-bp-votes.dapptools.info/#/block-producers) [explorers](https://votetracker.eosmedi.com/#/) and a [voting tool](https://www.youtube.com/watch?v=TF16fQCuIis), which all make voting; a clear, transparent, and user-friendly process.\n\nThirdly, not all forms of collusion are *bad*. Collusion may sometimes come in the form of productive coalitions in which block producers agree to coordinate their individual efforts into specialized tasks. For example, one block producer can focus its efforts on building a user friendly wallet, while another block producer agrees to focus its attention on building a decentralized exchange. If these two block producers choose to vote for each other with their immensely large stakes, they will in the long-term add value to the network, and inspire confidence in the small investors who make up the majority of the blockchain’s electorate. Collusion is only a bad thing when the majority of a cryptocurrency’s investors cannot hold the blockchain’s block producers accountable for the latter’s misconduct.\n\nSome block producers have already formed small coalitions to finance the development of essential dapps like [Chintai](https://www.chintai-eos.io/): an EOS leasing platform. These kind of coalitions can also help end ideological disagreements, and bring unity to the community. Moreover, voting restrictions make such coalitions more competitive: EOS has about [80 block producer candidates](http://eos-bp-votes.dapptools.info/#/block-producers), but EOS stakeholders cannot vote for more than 30 block producers.\n\n![](https://cdn.steemitimages.com/DQmVAcKWwjKWZXjs1wGsnjQtifbgEZUhkytSo9j1wk9QGMU/image.png)\n\n<center> Block producer coalitions could provide a variety of benefits to EOS’ dapp economy. </center>\n\nEOS also has some additional features to strengthen its democracy such as vote decay, which reduces the value of a given vote over a six month period. Vote decay prevents voter apathy, by forcing stakeholders to continuously evaluate the performance of the block producers they vote for. On the other hand, Block One — the company that developed the code behind the EOS blockchain — readily admits that vote decay is not a perfect way to increase voter activity:\n\n>We recommend that the constitution contain language forbidding the use of automated voting bots as the purpose of vote-decay was to ensure that voters re-evaluate their decisions rather than “set-it and forget it”. While it is not possible to prove the use of bots, it will be possible to prove that people do not use smart contracts to auto-vote.\n\nEOS’ dynamic leadership model can, however; be used to improve its voting algorithm and other protocol limitations. In time, blockchain democracies will come to dominate the crypto-space.\n\n*If you liked this article and would like to support my writing, you can leave a cryptocurrency donation:*\n\n*Bitcoin:* 1HiYu3Q7G9dczPmEtKTUw4dPbNfHJhRgC1\n\n*Bitcoin cash:* qplsmz3m6hvzvnhfusa7zpa477djzp5cpsuewgjgr5\n\n*Ethereum*: 0x9693CBe2D364f1EB6ef7C883d5DBE2562161013f\n\n*Ethereum classic*: 0xDA3caBFe304502f2D2c22eFb59597F38197cC897\n\n*Litecoin:* LKieBwqfQyMcESWDmR8X2d8pHHabzBFsGw\n\n*Dash:* Xqv4C8MtmShLdvJbYZfeZpDXoGF75gaBXb",
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      "body": "@@ -101,44 +101,47 @@\n his \n-is a copy of my original\n+post was originally published on\n  Medium\n- post\n .*%0A%0A\n@@ -2917,16 +2917,16 @@\n mpany.%0A%0A\n-\n %3E Estoni\n@@ -3357,8 +3357,9473 @@\n kchain).\n+%0A%0AMany more of the world%E2%80%99s most important ideas are plagued by the same conceptual imprecision we see in blockchain technology. But unlike other scientific ideas, the blockchain is a real-world solution. The mere fact that developers have coded and implemented blockchain technologies means that a working definition for blockchain technology must exist. No biologist has ever created life in a test tube or petri dish%E2%80%8A%E2%80%94%E2%80%8Aand that may be why life has no %5Bscientific definition%5D(https://pdfs.semanticscholar.org/b8d3/a50d448f0d1467b50d511787017daf2ab272.pdf), despite hundreds of years research and experimentation.%0A%0AMuch of the confusion surrounding the term %E2%80%9Cblockchain%E2%80%9D stems from an ongoing debate among software developers on whether a blockchain can be centralized. Can a single database hosted on just one server or one computer be described as a blockchain if it uses time-stamping, and hashing algorithms to connect chronologically recorded transactions? The short answer is no.%0A%0AA blockchain is fundamentally a data structure in which transactions are verified in batches called blocks, and the nodes or servers verify said transactions through a consensus algorithm. There are a variety of blockchain consensus algorithms, but they boil down to four essential variations: proof of work, proof of stake, proof of importance, and byzantine fault tolerance or some combination thereof.%0A%0AThe Verge notes that some people think a private blockchain is just a shared database, but these two types of distributed databases have different consensus algorithms. A private blockchain uses what can be colloquially referred to as a proof of permission consensus algorithm that requires each masternode or participating company in the network, to simultaneously verify each new transaction by submitting their respective private keys. A shared database on the other hand, uses %5Bmulti-concurrency version control (MVCC)%5D(https://www.multichain.com/blog/2015/07/bitcoin-vs-blockchain-debate/)%E2%80%8A%E2%80%94%E2%80%8Aa system in which simultaneous transactions that produce conflicting outputs are processed in parallel. And according to Gideon Greenspan, the founder of Coin Sciences, we can think of a blockchain as a distributed MVCC.%0A%0AWithout a consensus algorithm there would be no reason to group transactions into uniquely identifiable %5Bblocks or batches%5D(https://www.youtube.com/watch?v=_160oMzblY8) and there would be no logical way to justify the use of a blockchain data structure. Bitcoin, for example, uses transaction blocks to set a quantifiable limit on the number of times miners must solve a nonce, the unique key of each batch or block of transactions, in order to determine the overall security of the network.%0A%0AThe Verge then cited an article from David Gerard in which the director of the %5BWorld Food Programme (WFP)%5D(https://davidgerard.co.uk/blockchain/2017/11/26/the-world-food-programmes-much-publicised-blockchain-has-one-participant-i-e-its-a-database/) tried to explain what a blockchain is. As shown in the following quote; Houman Haddad, one of WFP%E2%80%99s executives, thought a comparison to Git would help clarify the meaning of blockchain technology.%0A%0A%3E Git like blockchain, uses merkle trees. A blockchain, in a certain sense, can be seen as a peer-to-peer (P2P) hosted Git repository. In order to modify this repository, users must have a copy of the whole repository and pull the latest commits. When you download a blockchain client and run it, you have to check out the entire blockchain history, much like checking out a Git repo.%0A%0ANot all distributed databases are blockchains, because not all distributed databases need to process transactions with a consensus algorithm. Git is the kind of distributed database that doesn%E2%80%99t need a consensus algorithm, because each super-user or masternode has complete control over a given code repository and these super-users don%E2%80%99t need to organize their transactions in batches or blocks. To become a blockchain, Git would need some of its code repositories to be owned by multiple companies and these companies would have to simultaneously agree to each new code change before it was implemented in order to justify the use of a consensus algorithm.%0A%0A!%5B%5D(https://cdn.steemitimages.com/DQmZgMtJ65NxrJpRutJYAuTQgxTCscysUoJBoDuiMaeEr3D/image.png)%0A%0AGit is a distributed database that has no consensus algorithm.%0A%0ATransactions or commits (code changes) in Git, can be processed one at a time or in batches, and the staging index where new data is temporarily stored is somewhat like Bitcoin%E2%80%99s memory pool of unconfirmed transactions, but neither one of these traits make Git more like a blockchain.%0A%0AThe WFP%E2%80%99s private network, built on the Ethereum blockchain, may contain a semi-immutable record of the thousands if not millions of transactions that have taken place within Azraq%E2%80%8A%E2%80%94%E2%80%8AJordan%E2%80%99s refugee camp for Syrians, but that doesn%E2%80%99t make it a blockchain. WFP%E2%80%99s private network could become a blockchain when international NGOs and private companies decide to host their own competing nodes on its network. The lack of trust among such competing institutions could justify the use of a consensus algorithm based on a blockchain data structure.%0A%0A!%5B%5D(https://cdn.steemitimages.com/DQmS8aneev4WRKJsarw7ep3DSMW43mKfCcW6VBaAgHWQYNR/image.png)%0A%0AA private network built with the code base of a blockchain, is not an actual blockchain.%0A%0AEthereum%E2%80%99s transaction %5Bgas costs%5D(https://ethgasstation.info) may have forced Haddad to build a private network. But since the launch of the %5BEOS mainnet%5D(https://eoscountdown.com), there%E2%80%99s just no reason to continue using a shared database. EOS is a feeless blockchain that can process thousands of transactions per second. If speed and transparency are the key attributes the WFP is looking for in their distributed database, then EOS may be the perfect fit. But if privacy is also a priority, then %5BTendermint%5D(https://tendermint.com) and %5BHyperledger%5D(https://www.hyperledger.org/projects) are both great tools for building a private blockchain from scratch.%0A%0AThe legal ramifications of ambiguous blockchain terminology may have an even bigger impact on the long-term growth of blockchain adoption than misleading marketing campaigns. Angela Walch, a law professor from St. Mary%E2%80%99s University, believes that %5BAmerica%E2%80%99s current attempts to create blockchain legislation%5D(https://poseidon01.ssrn.com/delivery.php?ID=370115027092010119124094021065083094103033031041027010022025004096092126026115124067057030039061008116026026082118028074117091049074003041085021120118064073018094090071022077118022105067089066100079113028099023111086022089095107089028001091105084017024&EXT=pdf) are driven by misconceptions and a poor understanding of how the new technology actually works. She provided a few suggestions on how US politicians should go about writing blockchain laws, like hiring internal blockchain experts in their legislative committees.%0A%0AShe then went on to describe how some former state employees are now closely associated with blockchain businesses and may be trying to persuade legislators to adopt more favorable legislation on behalf of their new clients. This sounds like a precursor to full-on political lobbying for the blockchain space. But we probably won%E2%80%99t see any collective efforts to lobby for favorable crypto-legislation among blockchain business leaders, until they see less %5Bpolitical volatility and polarization in American politics%5D(www.pewresearch.org/fact-tank/2017/12/19/far-more-americans-say-there-are-strong-conflicts-between-partisans-than-between-other-groups-in-society/), which may prolong the process of formulating coherent blockchain regulation. This may in turn make blockchain a more elusive concept for legal professionals.%0A%0AShen then argues that the confusion surrounding the idea of immutability has had a negative impact on US legislation.%0A%0A%3E The term %E2%80%9Cimmutable,%E2%80%9D with its varying and sometimes non-intuitive meanings in describing blockchain technology, is one that I very much wish we could strike from the blockchain lexicon, as %E2%80%9Cby ridding ourselves of an unnecessary confusion we should gain very much in the clearness of our thought.%0A%0AProgrammers are accustomed to the idea that certain objects, individual pieces of data in a program%E2%80%8A%E2%80%94%E2%80%8Acan be %5Bimmutable%5D(https://en.wikipedia.org/wiki/Immutable_object) in the sense that they cannot be changed, but they can be entirely deleted from the program or a module of the program in question. A lawyer, on the other hand, would think of immutability as a complete or absolute resistance to changes of any kind.%0A%0AUnfortunately, many programmers are pragmatic short-termists who feel that software development is more important than business communication, and that%E2%80%99s why programmatic terminology is often only as precise and as thorough as a pragmatist needs it to be. Blockchain developers could start describing blockchains as semi-immutable databases, and with a little caution and diligence, they will in due time solve all the contentious issues surrounding blockchain jargon.%0A%0A*If you liked this article and would like to support my writing, you can leave a cryptocurrency donation:*%0A%0ABitcoin: 1HiYu3Q7G9dczPmEtKTUw4dPbNfHJhRgC1%0A%0ABitcoin cash: qplsmz3m6hvzvnhfusa7zpa477djzp5cpsuewgjgr5%0A%0AEthereum: 0x9693CBe2D364f1EB6ef7C883d5DBE2562161013f%0A%0AEthereum Classic: 0xDA3caBFe304502f2D2c22eFb59597F38197cC897%0A%0ALitecoin: LKieBwqfQyMcESWDmR8X2d8pHHabzBFsGw%0A%0ADash: Xqv4C8MtmShLdvJbYZfeZpDXoGF75gaBXb\n",
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      "body": "![](https://cdn.steemitimages.com/DQmPTmVnYJi1qhTRsB8YSWdvcnuwn225AULQAAJavmnJxEg/image.png)\n\n*NB: This is a copy of my original Medium post.*\n\nBack in March, the Verge boldly claimed that the widespread use of the word “blockchain” by multinational companies, international institutions, and famous crypto-entrepreneurs, has transformed the technical term into a meaningless buzzword.\n\nAt the start of the article, the Verge cites a few examples of companies that have hijacked the word blockchain for their shady marketing campaigns. One company such changed its name from Long Island Iced Tea Corp. to Long Blockchain Corp, and saw its share price rise by 289%.\n\nThese and perhaps many other companies have a vested interested in perpetuating blockchain ignorance. There are hundreds of companies running crypto-scams — many which are ponzi schemes and fake mining pools that prey on the ignorance of cryptocurrency investors. The con-artists behind these pyramid schemes and fake mining pools often purport to mine various cryptocurrencies with insanely high and unreasonably consistent profit margins.\n\nA lot of crypto-ponzi investors are unaware of the fact that Bitcoin and every other mineable cryptocurrency have hash-rate difficulties that [increase exponentially](https://www.blockchain.com/en/charts/hash-rate) as more miners join their respective blockchain networks as nodes, and compete for the block reward: the newly minted cryptocurrency for each mined block.\n\nAll miners, including mining pools will experience diminishing returns, regardless of how much they have invested in mining hardware. The only way any given mining pool would make more money over time, is if other mining pools abandon their efforts. But that is an extremely unlikely scenario, because the sunk cost of investing in mining hardware compels most miners to continue mining their respective cryptocurrencies until the cost of electricity is greater than the revenue they receive from mining.\n\nThe lack of a clear and precise working definition of what a blockchain is makes it harder for new, and naive crypto-investors to learn more about the technology. And their lack of knowledge makes them easy prey for a new generation of con-men. Unethical marketing campaigns from ambitious tech companies will only make the situation worse.\n\nThe Verge had pointed out how legitimate companies are deliberately spreading confusing information to bolster their marketing campaigns. The article gives an example of the consequences of prominent tech companies running marketing campaigns built on the nebulous idea of a blockchain.\n\nAccording to the Verge, major news outlets such as the Harvard Business Review and The New Yorker, had erroneously described Estonia’s national identity system as a blockchain technology. The Verge attributes this error to the myth making borne from the marketing decisions of a private Estonian company.\n\n> Estonia’s technology vendor, Guardtime, rebranded its offering from [“hash-linked time-stamping”](https://e-estonia.com/wp-content/uploads/faq-a4-v02-blockchain.pdf) to a “blockchain technology.” That’s not necessarily untrue since “blockchain” has no agreed-upon definition — and for now, it’s a [good marketing tactic](https://www.bloomberg.com/news/articles/2017-12-21/crypto-craze-sees-long-island-iced-tea-rename-as-long-blockchain).",
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